This article investigates the modelling of the convenience yield in the European carbon market by using daily and intradaily measures of volatility. The convenience yield stems from differences in spot and futures prices, and can explain why firms hold inventories. The main findings are that (i)...

At the stage of international post-Kyoto negotiations, the adoption of ambitious public policies raises an increasing interest, as society has a whole is more concerned by the scale of damages and the potential irreversibility linked to climate change. The introduction of a tradable permits...

This chapter identifies the main price drivers of European Union Allowances (EUAs), valid for compliance under the European Union Emissions Trading Scheme (EU ETS) created in 2005 to regulate CO2 emissions of more than 10,000 high carbon-intensive installations across Member States. Based on key...

Alternative mechanisms for EU ETS (European Union Emissions Trading Scheme) quotas allocations within the Romanian economy are evaluated using a general equilibrium model within a dynamic intertemporal framework. Several distribution rules are simulated based on: the historical emissions, the...

The Emissions Trading Scheme (ETS) constrains industrial polluters to buy/sell CO2 allowances depending on a regional depolluting objective of -8% of CO2 emissions by 2012 compared to 1990 levels. Companies may also buy carbon offsets from developing countries, funding emissions cuts there...

This article proposes a mean-variance optimization and portfolio frontier analysis of energy risk management with carbon assets, introduced in January 2005 as part of the EU Emissions Trading Scheme. In a stylized exercise, we compute returns, standard deviations and correlations for various...

The European Union Emissions Trading Scheme (EU ETS) is the largest emissions trading scheme to date. This article summarizes the principle elements behind the trading system, and details the carbon price dynamics during Phase II (2008-2012), along with an analysis of traded volumes. The main...

The recent implementation of the EU Emissions Trading Scheme (EU ETS) in January 2005 created new financial risks for emitting firms. To deal with these risks, options are traded since October 2006. Because the EU ETS is a new market, the relevant underlying model for option pricing is still a...

This article critically examines the EU ETS intertemporal market during its Phase I (2005-2007). We test the Hotelling rule as a key element of a competitive equilibrium to validate whether allowance prices rise at the same rate as the interest rate. Including readily observable characteristics...